Walgreens will be closing approximately 1,200 US stores, about 13% of its US locations. The first phase of closures involving around 500 stores and it is expected to take place in fiscal year 2025. According to Walgreens news, these closures will target underperforming stores those where Walgreens either owns the property or has leases that are set to expire soon.
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According to the latest Walgreens news, Walgreens reported fourth-quarter earnings that exceeded Wall Street’s expectations. The company posted adjusted earnings per share of 39 cents compared to analysts’ expectations of 36 cents.
Revenue for the quarter amounted to $37.55 billion, surpassing the projected $35.76 billion. This growth represents a 6% increase compared to the same period in the previous year.
Walgreens recorded a net loss of $3 billion due to a valuation allowance aimed at reducing deferred tax assets primarily related to opioid settlements.
Walgreens will close 500 stores in fiscal 2025 alone with closures aimed at improving profitability by removing underperforming locations. These store closures are expected to have an immediately accretive impact on the company’s adjusted earnings and free cash flow.
CEO Tim Wentworth mentioned that most employees impacted by the closures would be redeployed, though exact figures regarding job losses were not disclosed.
Over the past year, Walgreens has made efforts to reduce costs. In fiscal 2024, the company surpassed its goal of cutting $1 billion in expenses.
This cost-reduction plan involved various measures including layoffs, closing underperforming stores and leveraging artificial intelligence to streamline the supply chain.
The US retail pharmacy segment saw the benefits from these cost-cutting efforts, with Walgreens working to manage its capital expenditure and optimize operations in this division.
According to the latest Walgreens news, In the fourth quarter, the US retail pharmacy segment generated $29.47 billion in sales, up 6.5% from the same period last year.
Walgreens’ US health-care unit, which includes primary care provider VillageMD and specialty pharmacy company Shields Health Solutions, saw growth in fiscal 2024.
Sales in the US health-care segment rose to $2.11 billion in the fiscal fourth quarter, a 7.1% increase compared to the previous year.
Shields Health Solutions posted a 27.8% growth in sales during the quarter. Specialty pharmacies like Shields are designed to deliver medications with specific storage and distribution requirements especially for patients with complex conditions such as cancer.
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According to the latest Walgreens news, Walgreens operates over 3,000 stores internationally and the company’s international segment also contributed to its fourth-quarter growth. This division generated $5.97 billion in sales, a 3.2% increase from the same period last year.
The UK-based drugstore chain Boots, which is part of Walgreens Boots Alliance saw a 2.3% rise in sales in the quarter. The international business continues to be a contributor particularly as Walgreens navigates the complex US market.
In the fourth quarter, US retail sales declined by 3.5%, while comparable retail sales fell by 1.7%. Consumers have become more cautious about discretionary spending especially on health and wellness products.
To address this, Walgreens cut prices on 1,300 products earlier in the year to appeal to inflation-conscious consumers.
Walgreens’ guidance for fiscal 2025 aligns with analysts’ expectations. The company anticipates adjusted earnings per share to range between $1.40 and $1.80.
Revenue for fiscal 2025 is expected to be between $147 billion and $151 billion. Wall Street analysts forecast sales of $147.3 billion.
Growth is anticipated in Walgreens’ US health-care and international divisions, but its retail pharmacy segment will likely experience declines as the company struggles with reimbursement issues and competitive pressures.
Other major retail pharmacy chains are also struggling with similar challenges. In October, Rite Aid announced plans to close 154 stores nationwide as part of its bankruptcy filing, a move driven by slumping sales and mounting opioid-related lawsuits.
CVS Health also disclosed that it will cut 2,900 jobs as part of a cost-reduction initiative aimed at saving $2 billion annually.
According to the latest Walgreens news, Neil Saunders, a managing director at GlobalData says that drugstores no longer have a clear competitive advantage.
He states that they need to focus on becoming destinations for something rather than general-purpose retailers, as consumers are now seeking more specialized experiences from the stores they visit.
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